Big Cities Seeking Bailout Money Too

November 14, 2008 / 11:16 PM
/ CBS/AP

Mayors of three cities hit hardest by the economic crisis - Philadelphia, Atlanta and Phoenix - asked the federal government Friday for a piece of the $700 billion bailout package, saying they need help just like financial institutions.

Mayor Michael Nutter of Philadelphia said he wants "to make sure that cities and metro areas are at the table, that their voices are being heard, that our challenges and problems are well understood, so that we can get relief."

The mayors proposed providing loans to help cities pay pension costs. They also want $50 billion in loans for infrastructure investments and additional one-year loans to cities that are unable to borrow cash because of tight credit markets.

"The future prosperity of this country is tied directly to our ability to provide basic services and quality infrastructure to our citizens," Atlanta Mayor Shirley Franklin wrote in a letter to Rep. Charles Rangel, chairman of the House Ways and Means Committee. "We are at serious risk in failing in that most basic public responsibility."

President-elect Barack Obama has also called for some sort of aid to state and local governments so they do not have to raise taxes or lay off workers while the federal government tries to revive the economy. But he has not proposed or endorsed a specific plan.

In Atlanta, an expected budget shortfall of $50 million to $60 million means that 4,600 city employees will have their weekly hours and pay cut by 10 percent. The city has also adopted a hiring freeze for most agencies and dipped into its reserves for $12 million.

And those were not the first budget cuts. Earlier this year, Atlanta laid off 372 employees, eliminated about 900 jobs and raised some fees.

The mayors made their request in a letter to Treasury Secretary Henry Paulson.

Asked about the request, a Treasury spokeswoman referred to Paulson's statement Wednesday that assistance to state and local governments was not the purpose of the bailout funding.

"The focus ... is to stabilize financial institutions and strengthen the financial system, promote lending and so on," Paulson said.

But lawmakers say Treasury has already changed its policies about how the bailout funds can be applied, and blasted Treasury officials in a hearing Friday, saying they were disingenous about their plans when the package was passed last month.

U.S. cities have seen revenue fall 4.3 percent from last year, according to Chris Hoene, director of policy and research at the National League of Cities.

For the first time since 1985, a survey showed that revenue from property, income and sales taxes are all down simultaneously, and widespread cuts in services are likely, he said.

New York City Mayor Michael Bloomberg said he is open to receiving federal assistance, but he doesn't think it's likely.

"We would certainly love to have our share of it," he told reporters Friday. "Everybody's lining up now. There's no industry that isn't saying 'We need a bailout.' There's no government entity that all of a sudden isn't saying 'We need a bailout.'"

Other cities such as Dallas and Wilmington, Del., hope to obtain help from a separate assistance package being promoted by the U.S. Conference of Mayors. Congressional leaders plan to push for a second round of economic-stimulus measures in a lame-duck session next week.

In Lexington, Ky., officials would like $125 million to hire more police and make improvements to a wastewater treatment plant, the airport and the city's downtown.

In San Jose, Calif., Mayor Chuck Reed initially said Friday that he planned to request his city's "fair share" of the bailout package - 2 percent, or $14 billion - to pay for mass transit improvements and expansion of the area's clean-technology businesses. He reversed course later in the day, saying he wouldn't request the bailout money at this point.

In Philadelphia, the city pension system lost more than $650 million in the first nine months of the year.

Last week, Nutter announced the city would lay off municipal employees, cut salaries, close most of its swimming pools and shut nearly a dozen library branches to cope with a $108 million shortfall this year caused by declining business and real estate tax revenue. The deficit could grow to $1 billion over five years, he said.

Phoenix's budget deficit is at least $200 million and could reach $250 million by June if tax revenues keep sliding. That figure represents up to 22 percent of the city's $1.2 billion general fund, which pays for most city services.

City officials say the cuts will affect every department. Phoenix will probably reduce hours at libraries, community centers and public pools and cut bus routes, among dozens of other actions.

If the government agrees to help, Phoenix could use the money to build new police and fire stations, water-treatment plants and extensions to a new light rail network.

"We're going to have to do this in order to keep our city growing and healthy and safe," Mayor Phil Gordon said.